Motorola Could Lose Cable Broadband Modem Market Share to Cisco and Arris
Motorola (NYSE:MOT), which primarily makes money by selling mobile phones, also leads in the cable broadband modem market where it competes with Cisco (NASDAQ:CSCO), Arris, Ambit and Thomson. Motorola’s cable modem market share, however, has declined steadily from 40% in 2005 to 30% in 2009.
We believe that Motorola cable broadband modem market share will continue to decline due to increasing competitive pressures primarily from Cisco and Arris, reaching about 27% share by the end of Trefis forecast period.
Broadband Modems Only 1% of Motorola’s Stock
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Broadband modems provide connectivity to high speed internet delivered over cable or DSL connections. Motorola sells cable and DSL modems to cable companies like Comcast (NASDAQ:CMCSA), Time Warner Cable (NYSE:TWC) and Cox Communications that in turn provide broadband services to end users.
We estimate that broadband modems constitute only 1% of the $7 Trefis price estimate for Motorola’s stock. In comparison, Motorola’s digital TV boxes business constitutes around 13% of Motorola’s stock.
Despite serving the same customer base as the cable modem business, the digital TV boxes business is worth more for Motorola since digital TV boxes are priced on average 7 times higher than cable modems. As a comparison, Cisco’s digital TV boxes business constitutes only about 6% of the $23 Trefis price estimate for Cisco’s stock.
Competitive Pressure from Arris
Time Warner Cable and Comcast have increased their business offerings through Arris. Arris has upgraded its modems to the latest DOCSIS 3.0 technology which supports higher broadband speeds up to 100 Mbps. Cable operators like Comcast and Time Warner Cable are now offering higher broadband speeds through Arris modems.
Competitive Pressure from Cisco
Cisco has increased its presence in the digital TV boxes market and has overtaken Motorola market share. A strong position in digital TV boxes will better position Cisco to negotiate with cable operators to provide both digital TV boxes and cable modems.
For additional analysis and forecasts, here is our complete model for Motorola’s stock.